Ministries okay draft of power dev agreement

KATHMANDU, MAY 21 -

The draft of the power development agreement (PDA) prepared by the Ministry of Energy (MoE) has been okayed by the related ministries paving the way for its signing with power developers.

MoE officials said they would now send the draft to the Cabinet for approval, and soon after it gives the go-ahead, negotiations will begin with hydropower developers on signing the PDA.

“Last week, the Finance, Law, Environment, Forest and Land Reform ministries approved the document in principle,” said Hari Ram Koirala, secretary at the MoE. “They have also given some recommendations.” He added that the ministry would now work to incorporate the recommendations in the draft and table it to the cabinet within a week.

Investors seek a government assurance through the PDA that it will help avert any possible social, economic or policy-level uncertainties during the construction phase of hydro projects.

Generally, issues on tax, license period, free energy, royalty, repatriation right and parties’ obligations are included in the PDA. After the PDA, projects will enter the construction phase.

Delays in preparing the text of the agreement have been blamed for preventing the government from concluding a deal with power developers.

So far, seven PDA agreements have been delayed. No progress has been made regarding the Upper Karnali (900 MW), Tamakoshi 3A (880 MW), Upper Marsyangdi (600 MW), Arun III (402 MW), Lower Arun (400 MW), Balefi (50 MW) and Likhu (34 MW) for around two years.

Koirala said that the ministry would now start corresponding with eligible power developers to sign PDAs. “The ministry will sign the agreement with GMR Infrastructure Limited and Satluj Jal Vidhyut Nigam in the first phase and then sign it with other hydropower developers later,” he said.

The ministry has studied the documents from these two Indian companies including the financial model they have proposed. “Since the documents submitted by these companies are at a matured stage, the ministry can directly sign the agreement with them,” said Koirala.

With the government signing different models of PDAs with developers, the MoE has developed a permanent type of PDA model this time which will help to sign PDAs in a short period in the future.

Lack of a PDA model has mainly hindered two Indian hydropower developers, GMR Satluj, from beginning work on projects that they have been assigned to develop.

Signing of the PDA was originally delayed after the Maoist party obstructed work on projects having Indian investment as part of its protest against “Indian interference” two years ago. Later, a tussle between the then energy minister Prakash Sharan Mahat and energy secretary Shankar Koirala further delayed the PDA.

Source: The Kathmandu Post